Discussion Paper
Aggregate and Firm-Level Stock Returns During Pandemics, in Real Time
Published: April 2020
Researchers sought to uncover the relationship between changes in COVID-19 infection rates, particularly those that were unexpected or unpredicted, and U.S. stock returns.
Analyzing projected COVID-19 infection forecasts and U.S. equity market returns and losses, researchers find that an unanticipated doubling (halving) of projected infections forecasts next-day decreases (increases) in aggregate US market value of 4 to 11 percent. This finding indicates that equity markets may rebound in the face of rising infection rates if the COVID-19 trajectory is less severe than anticipated. Findings also provided insight into record job losses resulting from the pandemic.
Abstract and Citation
Aggregate and Firm-Level Stock Returns During Pandemics, in Real Time, Laura Alfaro, Anusha Chari, Andrew N. Greenland, and Peter K. Schott, NBER Working Paper No. 26950, April 2020. JEL No. E27,F1,G12.